A Prescription for Better Health Care

Treat health insurance like auto insurance and hold people accountable

Washington may have enacted health care reform in March, but Larry Van Horn has a different idea for fixing the system.

A version of this article originally appeared in Modern Healthcare on Oct. 6, 2009.

I’m a balding, middle-aged, overweight American male. I have borderline hypertension and high cholesterol. I don’t like to exercise, and I enjoy eating foods with mayonnaise and cheese. I am Everyman. This is not an education problem. I know what I should do and generally how to do it—I just can’t make myself do it. I know the consequences of my short-run gluttonous behavior will negatively impact my long-run health, but like many people, knowing something is bad for me is insufficient to discipline my behavior. What’s worse, I am codependent on my health plan, and they are enabling my unhealthy behavior through the absolution of responsibility for my lifestyle choices.

I start each day with my morning “cocktail” of an ACE inhibitor, beta blocker and statin drug—all grossly subsidized by my health plan. I pay the same monthly premium as every other employee at my workplace with a family health plan. My wages have been reduced to fund the insurance premium behind the scenes, so I never know how much was taken from me. I know the only way to get my money back is to consume the services and drugs. I already paid for them.

It’s ironic that I rarely speed on my way to my favorite fast-food restaurant. The consequence of speeding is real and immediate. I would like to speed and given the opportunity—free of consequences—I’d light up my big-block V8 all the way to the drive-through. Let’s take it a step further. What if I purchased auto insurance the way I receive health insurance—priced independently of conduct, with a true premium cost hidden from view that covered all preventive maintenance?

I would drive like a bat out of hell. The insurance also would be so costly that I wouldn’t be able to afford it.

But unlike my auto insurance, my health insurance rates are not based on my underlying lifestyle choices, which are the primary determiner of how much health care I’m going to consume. We need to get to a world where I’m held individually accountable for the decisions that I make.

If my health insurance was like auto, home or life insurance—meaning it was individually underwritten, used for catastrophic use only, predicated on my behavioral decisions, and the prepaid consumption was instead funded out of my monthly wages after tax—would I be better off? There is little doubt that the marginal effect would be in the right direction.

Though treating health insurance like auto or life insurance would obviously be controversial, folks would change their behavior in a socially desirable way. Markets would form, prices would adjust, and demand for health services would change.

Larry Van Horn

Here’s another way to think of the value of basic health “maintenance” being included in a separate prepaid health plan. It would be as if you packed your auto insurance policy with additional insurance for oil changes, tire rotations and tune-ups. If those elements were part of your auto insurance policy, it would be much more expensive.

I want to do the right thing and make the right decisions to support a rational healthy lifestyle, but I need help. The current set of incentives and subsidies are stacked against me. I need my employer to hold me accountable financially for my slovenly behavior in ways that are currently prohibited by the Employee Retirement Income Security Act. I need the government to remove the preferential tax treatment of employer-provided health benefits that make it rational to consume too much health “insurance” and in forms that support poor conduct. I need my morning cocktail to be more expensive than salubrious lifestyle choices. I need to save more of my money to fund my health care consumption rather than looking for ways to spend other people’s money.

We seem comfortable with saving for and funding our retirement. Few count on Social Security to either be around or be the primary source of funding for retirement. We own it individually, yet Medicare is projected to be insolvent in 2017. The Centers for Medicare & Medicaid Services trustee report projects a long-run $37 trillion shortfall. I’m not saving for my post-retirement health care needs in large part because of the fact that I have never felt ownership and personal responsibility for the liability. This is the true health care crisis—a lack of individual ownership and a system that passes the buck.

If we all change our behavior by exercising, eating right and taking responsibility for our actions, we’re not going to solve the health care crisis. But it would be a clear step in the right direction. It is a step down the path toward a cultural change toward individual accountability, ownership and responsibility with respect to both our dollars and our decisions. It is a move away from spending other people’s money and shifting the burden to others.

Associate Professor of Management Larry Van Horn teaches within the Health Care MBA program at the Owen School.

You couldn’t be more on point with your assessment of our corruption system of health care incentives, spending, and “insurance”. The system is pure insanity. A small part of my business is brokering health insurance for small businesses/individiuals and I see the systemic stupidity up close. The business is so dismal I have turned my attention elsewhere.

How can we join forces to get our voice heard? What I can do to get involved? I am happy to do what I can.

P.S. As further evidence of your core message of poor behavior and choices…a close to home example…my younger brother (44) has two stents in his heart after nearly suffering a heart attack several years ago…as for me (47) no issues…why? …I choose to exercise regularly since childhood, eat carefully, have a morning cocktail of a multi-vitamin, 81mg aspirin, and fish oil. He unfortunately, choose video games, doritos, chips ahoy, etc. Same genes….dramatically different health outcomes…but thanks to our system we have the same health insurance premium (I sold him his policy). He is now changing…somewhat, but the system remains. It must go.

@Aceret – I feel you’re missing out on the point of the post. I’m not saying you are incorrect, just that you could possibly be missing the chief focus of the post. I am sorry if I’m being a the bad guy here. Simply my opinion!

tim stevens

Health insurance like auto insurance?

Hah, will NEVER happen because it would require individual responsibility where currently there is NONE.

The best example is childbirth. Want to have a child? “Insurance” pays for it, even though it’s usually planned.

Real responsibility would entail recognizing that your desires are not my obligations. Your costs are yours and yours alone and that insurance is a trade.

In it most basic essence, insurance is a bet. You bet you will have a loss. The bookie (the insurance company) bets otherwise. Somehow American society has come to view health insurance as a subsidy and not the bet it is.

It’s brilliant! Of course health insurance should be regarded in the same way as motor insurance. It is an inevitable part of life, but if it is abused there should be a hefty premium costs attached to it, and likewaise great bonuses for not doing so.